Simple Solutions to Staying Out of Debt

Madoline and I live in fear of debt; that is one of the reasons we are so vigilant about saving money. We have witnessed firsthand the consequences of extravagant spending and debt (perhaps we will share these stories at a later time), and that is why we live the way we do. So how do we stay out of debt? The solution is so simple it almost doesn’t seem like bona fide advice, but it really is.

I know everyone hates hearing these trite statements, but the reason they are so often repeated is because they are true. In fact, they are so basic they should be considered common sense. These principles work for both staying out of (and maybe even getting out of) debt.

The simple solutions to staying out of debt are:

• Spend less than you make
• Don’t waste money
• If your expenses are higher than your income
  • Cut back, and/or
  • Make more money

How to spend less than you make

Before you spend money on any treats for yourself, set aside what you need to pay your regular bills. If you aren’t able to keep from spending that money by only mentally setting it aside, try the following:

• Open a new bank account for your regular expenses (rent, utilities, etc.). Tip: Credit unions offer accounts without fees or minimum balances. Let’s call this account your “Expenses Account.”
• Add up all your bills and expenses at the beginning of each month and transfer that amount from your main account to your Expenses Account.
• If the bank or credit union issues you an ATM card and/or checks for that account, keep them in a safe place at home instead of carrying them in your wallet or purse.
• If you get paid every 2 weeks and your bills are due at the end of the month, try not to spend any money on luxuries with the first paycheck of the month. If your expenses are less than the amount of your paycheck, put all of that amount into your Expenses Account, plus a little extra padding just to be safe (to prevent overdraft charges in case you added wrong).
• After you have set aside all the money necessary to pay your bills, see how much you have left. Put as much into savings as possible, but if you feel like you need to treat yourself to a little something, do so at your own discretion.

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